Cielo Still Sell At UBS, Neutral at Credit Suisse After Q3 Beats Estimates

By Reshma Kapadia

Although Brazilian credit card company Cielo(CIOXY) reported a better-than-expected 3% increase in net income of 589 million reais, UBS analyst Frederic De Martz maintains his sell rating on the stock, which many fund managers favor.

He writes that the results don’t give the full story and he is still cautious because of a deceleration in growth, pricing pressure and regulatory risk.

“Cielo is is one of the top performing Brazilian financials at +11% ytd, despite the recent underperformance, which does not reflect current risks. Third quarter earnings did not reflect the headwinds in the card segment, which should appear in the coming quarters,” he writes.

Credit Suisse analyst Victor Schabbel reiterated a neutral rating, noting that while potential regulatory changes are unlikely to have a material impact risks have increased given the lack of visibility.

“It’s time to track the headlines rather than the bottom line,” Schabbel writes, noting an event by the central bank next week that may offer more visibility. “Soft regulatory changes and easing pressure on the sector could unpin a rebound. This, however, is yet to be seen,” he adds.

Copyright 2016 Dow Jones & Company, Inc. All Rights Reserved

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our
Subscriber Agreement
and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit